BITCOIN

Exodi

I expect we're about to see a string of collapses in the fallout of FTX. E.g. Genesis (though it is continually being propped up by its parent DCG).

One thing I think Danny and I agree on, is the importance of holding your own keys if you are intent on holding bitcoin.

Shady practices seem to be a common theme amongst crypto-firms.

Frequentlyhere

Exodi said:

I expect we're about to see a string of collapses in the fallout of FTX. E.g. Genesis (though it is continually being propped up by its parent DCG).

One thing I think Danny and I agree on, is the importance of holding your own keys if you are intent on holding bitcoin.

Shady practices seem to be a common theme amongst crypto-firms.

It certainly looks incredibly unwise to hold anything on a CEx now.

But just such a waste of life to be your own bank instead. Time and research to learn what to do, cost of whatever storage you need, and then you're still left with some fairly chunky residual risks of things like the device breaking, you forgetting your password, theft, someone hacking you via using a keylogger and on and on.

And for what?  To hold some digital magic beans mostly bought previously only because of positive speculation, a wave of cheap money, and the ease of buying through centralised exchanges. Now all of that does not apply.

I just don't see why any new person would bother. And new people bothering is the only thing that will keep the price up. And be no under illusion, the price of BTC relative to what is happening around it, is up!

DannyCarey

Frequentlyhere said:

Exodi said:

I expect we're about to see a string of collapses in the fallout of FTX. E.g. Genesis (though it is continually being propped up by its parent DCG).

One thing I think Danny and I agree on, is the importance of holding your own keys if you are intent on holding bitcoin.

Shady practices seem to be a common theme amongst crypto-firms.

It certainly looks incredibly unwise to hold anything on a CEx now.

But just such a waste of life to be your own bank instead. Time and research to learn what to do, cost of whatever storage you need, and then you're still left with some fairly chunky residual risks of things like the device breaking, you forgetting your password, theft, someone hacking you via using a keylogger and on and on.

And for what?  To hold some digital magic beans mostly bought previously only because of positive speculation, a wave of cheap money, and the ease of buying through centralised exchanges. Now all of that does not apply.

I just don't see why any new person would bother. And new people bothering is the only thing that will keep the price up. And be no under illusion, the price of BTC relative to what is happening around it, is up!

I wonder what the people of Lebanon would think of that statement?

I do agree though that it's certainly not as easy as it could be, but it really is not very difficult. It is also relatvely early days and there are other services being built to tackle this problem, such as Fedimint. Whilst exchanges are allowed to get away with shady behaviour then it's even more necessary to take self custody, its always been the point of Bitcoin anyway. 

DannyCarey

https://www.youtube.com/watch?v=aKURxpFnwwE

Topical.

Frequentlyhere

I wonder what the people of Lebanon would think of that statement?

I do agree though that it's certainly not as easy as it could be, but it really is not very difficult. It is also relatvely early days and there are other services being built to tackle this problem, such as Fedimint. Whilst exchanges are allowed to get away with shady behaviour then it's even more necessary to take self custody, its always been the point of Bitcoin anyway. 

We're not in Lebanon or the Democractic Republic of the Congo are we though, Danny? 

Though for most people, buying bitcoin in the last couple of years has been a great way to make you feel like it. You can either store it with a exchange and see it get stolen by a white collar mafia, or keep it under your mattress and watch it melt in value from there.

DannyCarey

Actually, (since you mention "the last couple of years"), if you had bought some bitcoin this time two years ago you would be sitting at about your entry price.. naturally there are huge reactive ups and downs, go back a further year and you would 3x up, even in the midst of everything that's going on right now.... 

User232002

Deleted_User said:

You're just showing that you don't get how modern currencies work.

Military spending and debt interest aren't in competition for the use of real resources (i.e. human labour and natural resources), because the latter is just a book-keeping exercise which doesn't use any significant real resources. And there is not a limited quantity of money per se (as opposed to real resources); more is created as required.

Paying a sub-inflation rate of interest is (very obviously) perfectly sustainable.

"Don't worry, we can print as much money as we want and it will all be perfectly OK."

Said by the same peole that told us over two years ago that printing several trillion dollars wouldn't lead to any meaningful inflation.

Nebulous2 said:

I’ve very limited knowledge of, and even less interest in Bitcoin. My son managed to fund 8 months backpacking on the sale of less than 1 Bitcoin that he mined (using my electricity) so I appreciate it has worked for some people. 

However paying interest at 4% while inflation is at 8 is a win for the Fed. Their debt is literally being inflated away.... 

Incorrect.

Its a short term win. Which is why no government in the world actually wants inflation to go away.

The problem is that in the long term it destroys faith in the currency. Inflation steals wealth from savers - if you continue to reward people and entities that take on lots of debt you are rewarding the wrong type of market participants.

Frequentlyhere said:

Have you thought about writing a column for Zerohedge, Darren? 

You alternately paint a picture of a Fed either raising interest rates so hard that it destroys pension funds or being so lax that it brings about the next Weimar republic. There is such a thing as moderation, you know.

This sort of argumentative style is depressing. Lets ignore the numbers posted. Lets not discuss unambiguous, measurable metrics - lets just hand wave it all away as nonsense.

I posted an analysis where interest rates stayed at 4% for two years. This is neither 'raising interest rates so hard,' nor 'being so lax.' 

Frequentlyhere said:

The far more likely course of events is that the Fed have already allowed high inflation to erode some of their liabilities (and it may be that moderately high inflation continues to do that for a while longer), they're now slowing that process down by raising interest rates, and at some point either brought about by demand destruction or potentially maybe some lynchpin of the financial system showing strain, or both, they'll stop rising rates and perhaps cut them (and perhaps yes, god forbid, print money too).

This is only a reasonable course of analysis if you genuinely believe that the fed can at any point get interest rates above inflation. Positive real rates are necessary to the proper allocation of capital. 

This seems highly unlikely with inflation at 10%, interest rates at 4% and debt to GDP pushing 130%+

Frequentlyhere said:

To make it your base case not only that the World's reserve currency will effectively fail, but also that as a result we'll all pile into an asset class that's shown itself to be hilariously awful in so many ways, is just...well....quite something.

Every world reserve currency in the past has failed, and lost its monetary premium along the way.

It seems far more erroneous to make it your base case that the USD will be the worlds reserve currency forever.

Frequentlyhere said:

Fiat currencies are longstanding money instruments backed by history, Governments and their armies that we all use every day.

History? "Its always had value, therefore it must always continue to have value." Incredibly flawed thinking and I can list numerous examples of monetary instruments that have lots of history that collapsed suddenly.

Governments? Not sure I would favourably compare the competence of the current class of political leaders compared to those from say 100 years ago. Re-election rates are at all time highs and satisfaction with government is at all time lows. Something in that.

Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance? If the answer is no, then I'm not sure what an army has to do with the value of the £.

Frequentlyhere said:

I'm not sure where to begin with your comparison of the fiat currency system with FTX. Perhaps to state the obvious, they're a little bit different?

The comparison is that if everyone tried to withdraw their money from a cash machine tomorrow, Banks would be in as much trouble as FTX is/was. I'm not defending what FTX did, but they cashed out $6B in 72 hours before stopping withdrawals - there aren't many national banks that could actually do that.

Frequentlyhere said:

Anyway, the irony in all of this is that the only thing being destroyed by higher inflation and associated monetary policy that you're ostensibly so concerned about is...lo and behold.. not the $ or £ but Bitcoin and the rest of crypto.

What use is avoiding 10% inflation in pounds if you've swapped it for an asset which has dropped by 75%+ in the same time period?

I didn't expect anything different.

But my investment horizon isn't 1 or 2 years.

Frequentlyhere said:

If I want to send money around the globe, I have a revolut account for that. I can exchange one currency fee-free for another, and send it *instantly* to someone else. Or I can use paypal. Or Wise. Or my bank account. etc etc.

Revolut doesnt send money instantly to anyone. Neither does your bank account. By using this method of comparison, you are either showing you don't understand how modern banking works or you are attempting you use peoples ignorance to support your point of view. Changing an entry on a spreadsheet is not 'sending' anything.

Frequentlyhere said:

The intermediary third party involved in those transactions is not a bad thing. That third party is there so that I'm less likely to send my money to a fraudster, or to the wrong person by mistake, or to compensate me if I buy a good/service not delivered, or if I lose my password/access to the platform I use.

None of these protections exist with bitcoin, and the end to end process to actually go from one person sending £ to someone in the US to spend in $ is much longer and more expensive to perform. Besides, why would you even bother if it's an appreciating asset? 

For most people. For those of us with a brain and a desire to take responsibility, Bitcoin offers the ability to do this without paying a fee to the middle processor (the bank). I transfer Bitcoin & Ethereum to many of the people I do business with in the US, Germany, Dubai & Indonesia. These are legitimate businesses, but I value the ability to do this without being asked millions of questions by my bank and then being charged £30 for the privilege of sending the money anyway.

The last sentence is prescient and to be expected. Gresham's law.

Frequentlyhere said:

But that's all irrelevant anyway, as with how it's currently perceived if you offered someone on the other side of the World to pay for a good/service in Bitcoin they'd probably think you have something to hide and also wouldn't have a clue how to accept if even if they didn't think that. And by the time it arrived you'd have to send more to cover for it falling 5% in the course of an afternoon!

I have no idea why people always use this example with it falling by 5% in an afternoon. One would imagine that an asset which has gone from cents to $70k would, in a random walk on any given day, be more likely to increase by 5%.

Frequentlyhere said:

This is the problem with all of Bitcoin's use cases. When you get to the detail of it, It serves no purpose that isn't already done better, except for criminal transactions and ransomware.

You're not getting to any detail though. You are creating arguments based on what you want to be true rather than what is true.

If you genuinely believe that your internet banking app is 'sending money' within 10 minutes then you're never going to understand the value proposition of Bitcoin.

If you genuinely believe that middle man processors are a good thing and that their cost should be shared over everyone, even those competent enough to use a more adult system or that middle man processors can always be trusted (a symptom of your privilege of living in a western country perhaps) then you'll never understand the value proposition of Bitcoin.

Exodi said:

You must be having a wind up. Every other week we see a multi-billion pound crypto firm collapse, at this point it's just business as usual. I'm not sure what confidence there is to knockback - the only people who remain steadfast in their loyalty are the crypto bros. Western governments wouldn't even humour the idea of considering adoption.

And yet, no bail outs. no use of taxpayer funds to prop up failing companies. This is a feature, not a bug. 

The resilience of this system will evolve over time to be more resilient than traditional finance. It will outcompete.

User232002

Frequentlyhere said:

We're not in Lebanon or the Democractic Republic of the Congo are we though, Danny? 

What kind of argument is this!?

There are tens of millions of people around the world in need of a money that can be self custodied and transferred peerlessly to others. Belittling this fact only shows your prejudice & privilege. I've been very clear over the two years I've been posting here that adoption will begin from poorer countries up because more modern countries have stronger property rights. Adoption is these countries is growing at insane rates - I've seen articles quoting 800 - 1500% / yr in Turkey (but you went on holiday to Cyprus and didn't see any Bitcoin being used, so you don't believe it).

That said, given the actions of many western governments over the last two years, perhaps having a sovereign store of value should be something that many westerners should be putting on their agenda too.

hallmark

One of the problems for Bitcoin believers is simply it's been too successful, and everytime it has been it's supporters immediately revise their expectations upwards (as we saw when BTC was close to $70,000 and people instantly began talking about it going to $1,000,000)

I believe BTC was $0.09 when it launched in 2009.  So some basic maths shows us that even if it had doubled in value every year it would still only be worth $737.

I suspect in 2009 even the most ardent fans would have settled happily for BTC doubling in value every year for the next 13 years.  So it's hard to see WHY $17,000 is cheap now, just because it was more expensive before.

Anything is possible though, and BTC sub-$1,000 or BTC >$1,000,000 could both happen and probably at least one of them will at some point.

Frequentlyhere

You didn't expect anything different, Darren?  

"darren232002 said:

if it ever went back below $20k my beliefs are invalidated and I'd be selling everything I have"

Re: The Fed, you indeed provided lots of numbers, but they weren't particularly relevant because you had missed the bit where, as several posters had pointed out to you, it was indeed perfectly sustainable because the Govt's debt is being inflated away

I think you also misunderstand inflation and interest rates. Inflation is a backward looking measure whilst interest rates act forward.  We have 11% inflation now, but that doesn't mean interest rates need to be >11% now. 

Even if we somehow knew what inflation would be in a year's time, it doesn't mean that the interest rate needs to be set to that level now, I just don't accept your premise. They only need to be set at a level which reduces inflation by dampening demand.  

All of which you seem to want to tie to bitcoin, but I still really don't see how it does. We're living through high inflation now, and it's just not doing any favours to bitcoin whatsoever. Long term, early days, I know I know.

Even if somehow the Fed fails in it's mandate to reduce inflation though (I really doubt it), then the idea of people jumping into an asset that has dropped by 3/4 in value in the same period seems very very distant.

Re: "Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance?"

No, but I believe that when rational people choose what form to spend, store and invest their money in, they're mindful of what the prevailing Government of the day is and the power that lies behind that.

People who are less mindful of that have sometimes ended up losing their life savings to frizzy haired chancers or resorting to hiding their 'money' in a popcorn tin to be taken away by the authorities whenever they decide it doesn't belong there.